BEIJING, May 31 (Xinhua) -- China expects fewer students to participate in the upcoming three-day annual college entrance exam this year, according to Sunday version of China Daily.

The college entrance exam has been seen as the make-or-break benchmark for millions of Chinese young people since 1977.

Minister of Education Zhou Ji had predicted that the overall number of applicants would exceed 10 million -- last year's total was 10.5 million -- but figures from local governments suggest the number of students taking part may be far fewer, the newspaper said.

In Shangdong, a provincial economic powerhouse, education officials said they received 100,000 fewer applicants this year than they did in 2008 -- a drop of more than 10 percent.

...

"Since the financial crisis last year, the grim employment situation has broken the 'employment myth' for those with a college degree. Some students changed their minds about getting a good job through higher education. They simply quit (from taking the exam)," an anonymous recruitment officer with the Beijing Institute of Technology was quoted as saying.

This kind of news isn't surprising. I hear all the time from young people in Xi'an about graduates from last year's university class who still can't find work. There are about to be several more million fresh graduates entering the job market in a few weeks also looking for jobs. Times are looking bleak for educated Chinese young people trying to find work doing what they studied at university.

This phenomenon of people questioning the value of high-level education is not limited to China. America is currently undergoing a similar debate.

An article from last week's New York Times' Magazine - "The Case for Working With Your Hands" - does a great job talking about the more academic life young Americans have been molded for and the more labor intensive jobs that they are told to avoid.

Here's the beginning of the article:

The television show “Deadliest Catch” depicts commercial crab fishermen in the Bering Sea. Another,“Dirty Jobs,” shows all kinds of grueling work; one episode featured a guy who inseminates turkeys for a living. The weird fascination of these shows must lie partly in the fact that such confrontations with material reality have become exotically unfamiliar. Many of us do work that feels more surreal than real. Working in an office, you often find it difficult to see any tangible result from your efforts. What exactly have you accomplished at the end of any given day? Where the chain of cause and effect is opaque and responsibility diffuse, the experience of individual agency can be elusive. “Dilbert,” “The Office” and similar portrayals of cubicle life attest to the dark absurdism with which many Americans have come to view their white-collar jobs.

Is there a more “real” alternative (short of inseminating turkeys)?

High-school shop-class programs were widely dismantled in the 1990s as educators prepared students to become “knowledge workers.” The imperative of the last 20 years to round up every warm body and send it to college, then to the cubicle, was tied to a vision of the future in which we somehow take leave of material reality and glide about in a pure information economy. This has not come to pass. To begin with, such work often feels more enervating than gliding. More fundamentally, now as ever, somebody has to actually do things: fix our cars, unclog our toilets, build our houses.

When we praise people who do work that is straightforwardly useful, the praise often betrays an assumption that they had no other options. We idealize them as the salt of the earth and emphasize the sacrifice for others their work may entail. Such sacrifice does indeed occur — the hazards faced by a lineman restoring power during a storm come to mind. But what if such work answers as well to a basic human need of the one who does it? I take this to be the suggestion of Marge Piercy’s poem “To Be of Use,” which concludes with the lines “the pitcher longs for water to carry/and a person for work that is real.” Beneath our gratitude for the lineman may rest envy.

This seems to be a moment when the useful arts have an especially compelling economic rationale. A car mechanics' trade association reports that repair shops have seen their business jump significantly in the current recession: people aren't buying new cars; they are fixing the ones they have. The current downturn is likely to pass eventually. But there are also systemic changes in the economy, arising from information technology, that have the surprising effect of making the manual trades — plumbing, electrical work, car repair — more attractive as careers. The Princeton economist Alan Blinder argues that the crucial distinction in the emerging labor market is not between those with more or less education, but between those whose services can be delivered over a wire and those who must do their work in person or on site. The latter will find their livelihoods more secure against outsourcing to distant countries. As Blinder puts it, “You can’t hammer a nail over the Internet.” Nor can the Indians fix your car. Because they are in India.

If the goal is to earn a living, then, maybe it isn’t really true that 18-year-olds need to be imparted with a sense of panic about getting into college (though they certainly need to learn). Some people are hustled off to college, then to the cubicle, against their own inclinations and natural bents, when they would rather be learning to build things or fix things. One shop teacher suggested to me that “in schools, we create artificial learning environments for our children that they know to be contrived and undeserving of their full attention and engagement. Without the opportunity to learn through the hands, the world remains abstract and distant, and the passions for learning will not be engaged.”

A gifted young person who chooses to become a mechanic rather than to accumulate academic credentials is viewed as eccentric, if not self-destructive. There is a pervasive anxiety among parents that there is only one track to success for their children. It runs through a series of gates controlled by prestigious institutions. Further, there is wide use of drugs to medicate boys, especially, against their natural tendency toward action, the better to “keep things on track.” I taught briefly in a public high school and would have loved to have set up a Ritalin fogger in my classroom. It is a rare person, male or female, who is naturally inclined to sit still for 17 years in school, and then indefinitely at work.

This article's author, Matthew B. Crawford, makes some really keen observations and criticisms of the life Americans, and more and more Chinese, idealize as "getting ahead."

In the not too distant past, I meditated (or was it ranted) about the idea of "getting ahead" in contemporary society. I came to the conclusion that the dreams and idealizations that I'd been fed from the time I was a child may have been the product of a society that had lost complete touch with reality. Based on the state of the the US' economic system and the state of its people, I feel justified in questioning how involved I want to get with "The American Dream": a house with a white picket fence and a mortgage, 3.18 children, etc.

I did participate in America's university system. I even got a worthless degree: a bachelor's degree in philosophy. I have student loans still to pay off.

I don't regret my decision to pursue a higher education. In getting a degree that fostered independent thought and developed my mind, I feel as though the education I received was invaluable. My degree isn't going to knock down to many doors in future job applications, but it was a very beneficial thing for my life.

At this point in time though - the summer of 2009 - I completely understand a young adult at the crossroads of life deciding against spending four years of his or her life in a college or university that wants to prepare him or her for a life of sitting in a cubicle.

As the NY Times article posits, skipping a traditional four year university doesn't mean one has to stop learning. I'm very much in support of learning a trade or specialized skills if one chooses against the more cubicle-based path. I'm definitely not against education and learning.

I do feel that the current status of the world and its economic systems calls for young people to reassess the assumptions about where they will fit in the world economy in the years to come though.

Saturday, May 30, 2009

One of the presents Qian gave me for my birthday was these stone reflexology sandals. Pretty crazy, eh?! To answer your question, yes, they take some getting used to. But honestly, after wearing them for a few days, I can wear these sandals around the apartment for extended periods of time. My feet adjust to them after a few minutes and I hardly even notice them after a while.

These shoes are a manifestation of the ancient Chinese belief that the bottom of one's feet is the key to one's qi and health. These shoes seem to mimic walking paths like this one, which can be found in public parks all over China and Asia:

Reflexology (zone therapy) is an alternative medicine method involving the practice of massaging, squeezing, or pushing on parts of the feet, or sometimes the hands and ears, with the goal of encouraging a beneficial effect on other parts of the body, or to improve general health.

There is no consensus among reflexologists on how reflexology is supposed to work; a unifying theme is the idea that areas on the foot correspond to areas of the body, and that by manipulating these one can improve health through one's qi.

...

Many civilizations have practiced reflexology. Evidence of this has been documented on four continents: Asia, Europe, Africa, and North America. The most common theory is that the earliest form of reflexology originated in China, as much as 5000 years ago. The early Taoists are credited with originating many Chinese health practices. The Cherokee tribes of North America to this day practice a form of reflexology that they continue to pass from generation to generation. Reflexology traveled across India, Japan, Asia, and China. Traditional East Asian foot reflexology is called Zoku Shin Do. This is the foot portion of the Japanese massage technique. The roots of Zoku Shin Do go back to ancient China and are over 5000 years old. Many changes took place in zone therapy, or reflexology, as new knowledge was added. In China, reflexology reached a new level. The practice of acupressure using the fingers turned into the practice of acupuncture using needles. The study of the reflex points still existed, but the knowledge was linked or added to and taken in a new direction—the direction of meridians. The Chinese concept of meridian therapy is an important part of the foundation of reflexology.

At the bottom of the reflexology Wikipedia page, it notes that reflexology was featured on Penn and Teller's TV program "Bullshit!" I can only imagine what those guys had to say about the practice. I've also done a Google search on reflexology and there seems to be a large segment of the world's population who think that reflexology is a complete sham.

Personally, I'm happy to wear these sandals around my apartment for a few minutes a day. Do I think that my life is going to be changed significantly by wearing them? No. Do I have faith that these sandals might help my qi out in some way that could possibly have positive benefits on my life? I'm not counting on it.

But hey, Qian gave me the sandals, I find them reasonably comfortable, and I'm going to continue wearing them. If I find that my qi is all groovin' in the coming weeks or months, I'll be sure to share my experiences with all of you.

Friday, May 29, 2009

WASHINGTON — The United States is pressing China to consider taking a variety of severe sanctions against North Korea, including the inspection of suspect ships and planes, as it tries to ratchet up the global response to Pyongyang’s latest nuclear test, administration officials said Thursday.

But it is not clear that the Chinese government has the stomach for a heightened showdown with North Korea, these officials said, even though its criticism of the underground test on Monday was unusually vehement.

...

The administration is also seeking China’s cooperation in a global effort to disrupt the flow of money to North Korea’s ruler, Kim Jong-il, and his family, officials said. Some of that money is suspected to be held in Chinese-owned banks, making such an effort diplomatically sensitive.

Still, a senior official said he was “pleasantly surprised” by how open China was to cooperating with the United States. China has historically tolerated the erratic behavior of Mr. Kim, worrying more about a calamitous collapse of his government than about his nuclear ambitions. But the recent test and missile launchings, the official said, may have crossed a line with China’s leaders.

“At the level of Chinese irritation, this is historic,” said the official, who spoke on condition of anonymity because he was not authorized to speak publicly. “Normally, the Chinese urge us not to react. But they are reaching a point where they could be agreeable to using more of their own weight.”

North Korea is a "fascinating" place. In the same way that the holocaust was a fascinating event in history. I'd be happy to see North Korea lose its friends, well friend (China), over its latest nuclear testing. I'm not sure how the logistics would work, but seeing a 180 degree change of direction in that country over the coming years would be a wonderful thing.

Thursday, May 28, 2009

Days ahead of U.S. Treasury Secretary Timothy Geithner's visit to China, Beijing has already shut the door for discussion on the appreciation of China's currency, the yuan, pledging it will keep the currency stable to help Chinese exporters.

In an executive meeting of the State Council presided by Premier Wen Jiabao, the leading comrades reiterated their determination in guarding the yuan. "We have to maintain the exchange rate basically stable at a reasonable and balanced level," an official statement declared after the Wednesday meeting.

The Chinese yuan has been hovering around 6.83 per U.S. dollar since the middle of 2008. Analysts said China has virtually repegged the yuan to that level. Over the past two years, the yuan has steadily risen against the dollar, as U.S. officials have been demanding. The Chinese currency surged 7.1% against the greenback last year after gaining 6.9% in 2007 and after rising 3.8% in 2006.

China's trading partners, especially the U.S., have been urging China to allow the currency to further appreciate to ease global trade imbalances. U.S. Treasury Secretary Timothy Geithner might put the topic on his agenda to discuss with Chinese officials in his trip to China from May 31 until June 2.

Yet, China regards the sharp fall in its exports as the biggest difficulty in keeping its economic on growth track. Because a stronger Yuan would crimp exports further, there is not much hope Geithner would find willingness from China to engineer a rise in its currency - particularly when Beijing blames excesses in the U.S. for the global financial crisis that has slowed Chinese growth.

A couple weeks ago, the New York Times Magazine ran an informative and interesting article on China and America's relationship going forward. The lede of the article talks a bit about Geithner and his ties to China.

On Timothy Geithner’s first day as a Dartmouth freshman, while he was walking across campus on his way to register for classes in the fall of 1979, he heard a man speaking Thai — swearing in Thai, to be precise — from a balcony. Geithner found this amusing, because only a couple of months before, he left his home in Thailand, where his father worked for the Ford Foundation, to move to Hanover, N.H. So he stopped to talk to the man, who turned out to be David Keenan, a Chinese teacher at Dartmouth. The two quickly realized that they had a lot in common; among other things they attended the same schools, about a decade apart, in Bangkok and Delhi. (The cause of Keenan’s swearing, alas, has been lost to history.) Having established a rapport, Keenan then decided to do a little salesmanship. He urged Geithner to take Chinese, the only Asian language that Dartmouth offered at the time.

Geithner did, and found that he liked it. Learning another Asian language, he told me recently in his soaring office at the Treasury Department, “was a nice little piece of continuity for me.” He ended up majoring in government and Asian studies and taught basic Mandarin classes to make some money. After Dartmouth, he attended the School of Advanced International Studies at Johns Hopkins. He then spent three years at Kissinger Associates, working with Brent Scowcroft, the future national security adviser, and helping Henry Kissinger write chapters on China and Japan for one of his books. From there, he joined the Treasury Department and began a meteoric rise through the bureaucracy.

In the five months since Barack Obama introduced him as the next Treasury secretary, Geithner has already run through what seems to be a career’s worth of images: the brilliant technocrat whose appointment caused stocks to soar; the neophyte public figure who flopped in his debut; the regulator who has grown too close to Wall Street; the Obama adviser with the same unflappable nature as his boss. One image that hasn’t yet attached itself to him, however, is his original professional image. By training, Tim Geithner is a China hand. And though the immediate financial crisis is likely to dominate his tenure at Treasury, the economic relationship between the United States and China may ultimately prove just as important. It could be crucial to preventing the next crisis.

Geithner has a big week ahead of him. Placating the Chinese on the stability and viability of US dollars while at the same time trying to work on China and their currency, uhh, that "m-word," is going to be a tight-rope walk to say the least.

Hopefully Geithner really is a "China hand" and will perform well in the contradictory and confusing world that is Chinese politics. The US is going to need China to stay on board with them over the next few years. If Geithner could somehow turn out to be a gifted negotiator with the Chinese (yeah, I know it's a stretch), that would cancel out a lot of the stumbles he's made so far in office.

Tuesday, May 26, 2009

HONG KONG/LOS ANGELES, May 26 (Reuters) - The world economy may be slumping, but don't tell that to Macau -- the former Portugese colony which is set to trump Las Vegas heading out of the worst global downturn since the Great Depression.

In the smoke-filled gambling halls of Macau's MGM Mirage casino, hundreds of Chinese gamblers were crammed around tables flipping cards, playing roulette and rolling dice on a recent day, seemingly unaffected by the slowdown.

The ace up the sleeve of Macau, the world's biggest gambling market, is this steady influx of risk-loving Chinese flocking to the only place in China where casinos are legal. Las Vegas, on the other hand, is saddled with a stagnant U.S. economy and glut of new casinos preparing to enter the market.

"We've seen better-than-expected performance in the overall gaming market of Macau," said Credit Suisse ( CS - news - people ) analyst Gabriel Chan. "Vegas is still suffering and will take a longer time to recover, but in Macau, we are beginning to see the light at the end of the tunnel."

One of the most amazing stats I've heard about Macau is this: there are approximately 3.1 billion people within a five hour flight of Macau. That is incredible. Talk about a primo location.

In the past several years, Vegas' image has been revived. People of my generation have really lionized the place. I'm a little bit confused by this actually. My home city, Kansas City, has a number of casinos. I've never been to Vegas and I'm not completely aware of everything it has to offer, but this kind of competition has to hurt the place. Kansas City is no Vegas, I know that. But there are a wide selection of places one can choose from if he or she wishes to go gambling in Kansas City. For this reason, it's not surprising to me Vegas is being hit hard during the current downturn.

The fact that gambling is illegal in China is going to be great for Macau. That, combined with China's rise, and Macau's close proximity to the masses of Asia is going to make Macau a Mecca of gambling going forward.

Monday, May 25, 2009

Today was a sad day for me. The Chinese teacher I've had for the past two years and I had our last class. 马老师 (Teacher Ma) is going to South Korea later this week to work and to live with her boyfriend. She will be back in Xi'an in a few months, but I'm most likely going to be back in America at that time. Regardless, we had our last tutoring session today.

I began having class with Teach Ma in the Spring of 2007. I met her at a school in Xi'an that specializes in teaching foreigners Chinese (the school is particularly popular with Xi'an's buzzing missionary community). I enjoyed her classes a lot, but the school was way too expensive. The missionary aspect of the place also weirded me out a bit. I told her that I wanted to continue having classes with her, but outside of that school. She told me that such an arrangement was against the rules of her contract, but that she'd be quitting the school in a few months. So after I visited America in the summer of '07 and got back to Xi'an that fall, we began meeting again.

Teacher Ma and I met for one-on-one lessons four hours a week for the better part of the past two years. Over these two years, I went from being a really shoddy beginner to the lower-intermediate speaker I am now. We went through the first two books of 发展汉语, the books from the Beijing University Press that Shaanxi Normal University uses to teach foreigners Chinese, and had begun a third intermediate book. We definitely didn't move at a break-neck pace - it took me two years to study what university students study in a year - but we moved at the right pace for me considering that I've been working a job thirty hours a week in addition to studying Chinese during this time period.

Over the two years, we discussed tons of things outside of the books.

One of the things I was able to do was pick Teacher Ma's brain on questions regarding Chinese politics and history that I didn't feel comfortable asking most Chinese people. Teacher Ma is from Urumqi in China's Xinjiang Autonomous Region in the far west. She's half Uighur, half Han. Hearing her unique perspective on China's development, its history, and its future has been fascinating (and has surely contributed to this blog in many ways).

It's also been helpful for me to have a female Chinese teacher for the simple fact that it's helped me understand my own Chinese girlfriend better. Qian and I have always had a generally smooth relationship, but when there were any rough patches or questions regarding what we're doing, Teacher Ma, who is our age, was able to help me understand the psyche of a twenty-something year-old Chinese woman a great deal.

I've said before that having a Chinese girlfriend doesn't necessarily help one's Chinese. Qian's English is so good that we hardly ever speak Chinese. It's just not worth the effort when English is there for us to use. We're speaking Chinese more often, but still no more than 15% of our total conversation. Having a Chinese girlfriend also acts as a crutch when we're out on the town and Qian can just do all the talking for us. Indeed, having a Chinese girlfriend who speaks English can actually hinder one's Chinese ability.

Having Teacher Ma, who speaks very little English, has been so important for me. All the conversations that we've had have been in Chinese. Our two-hour-at-a-time lessons are probably 99% Chinese, with English only being used a word or two at a time to clarify new words or complex grammar structures. Not being able to revert back to English with Teacher Ma has been so important. I've truly needed someone in my life to force me to use Chinese.

My Chinese is not the best. My tones aren't very good and I don't spend enough time studying outside of the four hours a week we have class to really boost myself into a more fluent level of Chinese. But I'm at a very "conversational level" of Chinese. I can chat with Chinese people about all kinds of different topics, particularly in a one-on-one setting. This ability is most certainly due to the fact that I've been engaged in lessons with Teacher Ma over these past couple years.

I've joked with Teacher Ma before that my Chinese may not be the best advertisement for her teaching abilities, but there's no doubt that she's been a very special teacher. Our classes in Shaanxi Normal University's garden and/or cafeteria have been well worth the small amount of money per hour I paid her.

Assuming that I don't see Teacher Ma after she comes back from Korea later this year, I'm not sure when the next time I'll see her will be. No matter when that is, she and the time we spent together using Chinese over the past couple years are always going to hold a special place in my heart.

Sunday, May 24, 2009

A group of Chinese investors are setting themselves up to become the first foreign owners of an NBA team.

From The Cleveland Plain-Dealer:

CLEVELAND, Ohio -- The Cavaliers already have a global star. A clutch-shooting global star at that. Soon they may have a global partner that could help secure that global star's future in Cleveland.

According to multiple sources within the Cavs, franchise majority owner Dan Gilbert has a tentative agreement in place to allow a group of Chinese investors to purchase a significant stake in the Cavaliers Operating Company, the entity that owns the Cavs and operates Quicken Loans Arena. The group is led by JianHua (Kenny) Huang, a Chinese businessman who has become successful by linking American and Chinese companies.

Huang and several of his partners were in Cleveland and attended Games 1 and 2 of the Eastern Conference finals this week. He sat in Gilbert's courtside box Friday night and watched LeBron James hit a buzzer-beating 3-pointer to even the series with the Orlando Magic at one game apiece.

"Dan Gilbert has been approached multiple times over the past few years by investors that wanted to join the Cavs' ownership group," said Len Komoroski, Cavs and Quicken Loans Arena president said in a statement.

"This has recently happened again. As has been done previously, we're in the process of reviewing the possibility presented to us. Beyond that, we do not feel it would be appropriate to give further comment at this time."

Calls to Huang's company were not returned.

The direct impact of the move is securing the future of the franchise, which has been in a minority ownership flux for the last couple years as it loses millions in attempting to build a championship-quality team around James. It will not only mean an injection of capital but will open the Cavs to business in China. The move, which has been kept mostly secret in America, is being supported by the NBA as they have encouraged development in China.

This article, from a Cleveland newspaper that obviously like to see LeBron James stay in Cleveland, talks about the impact that Chinese ownership could have on James and his decision on whether to stay in with the Cavaliers or go to the Knicks in New York in 2010:

The other effect, which is surely the more interesting side to Cavs fans, is how vital this new link could be for James -- providing a huge tie-in with an economy James is eager to tap.

...

"You have to think globally," James said recently of his business interests. "I have a lot of fans in China and they're important to me."

James and Nike, by far his largest sponsor, have been on a mission to create a bond with the Chinese over the last three years in the run-up to the Beijing Olympics. James has made four visits to China, one with the Cavs as part of a preseason trip in 2007.

With basketball exploding in popularity among millions of young Chinese with exponentially growing buying power, James has targeted opportunities in the Far East to make the same kind of marketing impact in modern China that Michael Jordan had in the United States in the 1980s and 1990s. Only the market there operates on a dramatically larger scale.

As of 2009, there is no doubt that LeBron James is the best basketball player on the planet. I'm in awe of the guy. He's massive - 6 feet 9 inches, 275 pounds - yet he's the fastest player in the NBA and has the highest vertical leap. There's never been anybody like him before.

I can't imagine James can say much in Mandarin or that he's taking the language very seriously, but the simple fact that he cares at all about learning Chinese shows how seriously he takes his popularity in China.

James is twenty-four years old. No matter if you're in Cleveland in Chongqing or in Chengdu, it's going to be amazing watching LeBron over the coming decade.

Friday, May 22, 2009

Talks before Copenhagen's Climate Change Conference later this year are continuing to heat up.

From The Wall St. Journal:

China, in a new document outlining its stance ahead of December climate talks in Copenhagen, says it wants developed nations to cut their greenhouse-gas emissions by at least 40% by 2020 from 1990 levels. But that is a far more aggressive cut than the level proposed in the U.S.'s Waxman-Markey bill. Europe, in turn, has pledged to cut emissions by at least 20% by 2020 from 1990 levels, and by 30% if other advanced economies follow suit.

The divergent views come as negotiations begin in earnest for a successor to the Kyoto Protocol, which expires at the end of 2012. China's 40% target represents the high end of cuts in emissions mentioned in the 2007 Bali road map, which stopped short of endorsing a specific target.

China is also asking rich countries to donate at least 0.5% to 1% of annual gross domestic product to help poorer countries cope with climate change and greenhouse-gas emissions, it said in the document, which was posted on the Web site of the National Development and Reform Commission, its economic policy-making body.

China has resisted any mandatory quotas on carbon emissions. The country is widely considered to have surpassed the U.S. as the world's top polluter.

So China is really playing the developing nation card here and calling upon richer nations to help out those not at a high-level of economic development yet though.

Somewhat surprisingly, China appears to be walking the walk and not simply talking the talk on this issue.

From The New York Times:

China's efforts to curb greenhouse gas emissions are "impressive" and are often underestimated in the United States, President Obama's top climate change ambassador said yesterday.

U.S. climate envoy Todd Stern told E&E that when major economies meet in Paris on climate change next week, they will try to bridge the gap between ambitious domestic energy agendas in some emerging nations like China and the seemingly unyielding negotiating positions that developing countries take to the U.N. global warming talks.

"If you look at what a country like China is actually doing with respect to climate change, it's quite significant," Stern said. "It's quite impressive in many ways."

China and the United States are the world's biggest global warming polluters, accounting for 47 percent of greenhouse gas emissions. The 1997 Kyoto Protocol -- to which the United States is not a party -- requires only industrialized countries to make cuts. So far, neither America nor China has been willing to reduce emissions before the other.

Advocates for a new global climate treaty in Copenhagen this year say an agreement between China and the United States is critical. Chinese negotiators, meanwhile, have remained firm in insisting that industrialized countries act first and that developing nations not be forced to make legally binding commitments.

Still, Stern said he believes Americans often wrongly assume China is not acting on climate change at all.

"In fact, they have a 20 percent energy intensity goal, they've got a significant renewable energy goal, and they've got an auto standard that is about where our brand-new ones are," Stern said, referring to the Obama administration's proposed new fuel efficiency targets of 35.5 miles per gallon by 2016.

"It's clearly not enough," he said, but added, "they've got a lot of things going on."

I suppose there might some kind of politicking behind these comments, but the reason why Stern would give false praise to the Chinese isn't abundantly clear to me. Stern may very well just be stating what he really believes or is observing.

Combatting climate change and carbon emissions seems like a great economic opportunity in addition to being the responsible thing to do. It would not be surprising to me if China and the US were to embrace fighting climate change for economic reasons more than anything else.

Developing clean energy resources could be a great way to innovate one's country out of recession. Becoming less reliant on oil, its fluxuating prices, and the shady countries that provide much of it would also be a very noble and practical goal.

Whether the adoption of an agreement to reduce carbon emissions by China, the US, and the rest of the world happens because of attempts to cultivate new economic opportunities or because of genuine concern for the environment doesn't matter too much to me. As long as some kind of action is taken, that is enough for me.

Thursday, May 21, 2009

It's time for me to update the "Who is Mark?" tab on the side of my blog. I am no longer 25 years-old. Yesterday was my 26th birthday.

Unfortunately, the proxy server I'm using to update this blog isn't equipped to let me edit that box. Oh well. I'll take care of that eventually.

I had a very satisfying birthday yesterday. Ate lunch with Qian and her parents. Rested in the afternoon. And then ate pizza, went to Xi'an's best bar (Park Qin), and then my favorite dance club (1+1) with my closest friends at night. A really great day in all facets.

Outside of my personal life and more in terms of what's going on with this blog, I still lament that Blogspot is down and I'm not going about my normal blogging activities. I think a slowing down on here might be a good thing in a way though.

I'd gotten so used to updating this blog every day that I think I was beginning to "lose sight of the forest for the trees." I'm afraid that I was getting so wrapped up in the daily minutiae of China's news, that I was losing some grips with the reality of what is really going on in this fascinating country.

The whole point of "Mark's China Blog" is to have a unique view on China and what's going on inside the country. Having a small break from my daily trawling of Google News for interesting nuggets on China will be good for me and my blog in the long-run, I think.

Right now, I'm just taking things easy and am enjoying life as much as possible in Xi'an (allergies and hay fever aside).

Bear with me as I figure out what exactly I'm doing with this blog as it remains blocked in the Middle Kingdom. Hopefully in the end I get through this latest blocking refreshed and as sharp as ever.

Friday, May 15, 2009

I have to assume that this has happened because the calendar is getting closer to a rather, um, sensitive date. If you don't know what I'm talking about, you will in the coming weeks.

For the record, this is the third time my blogging host has been blocked in China. Xanga.com was blocked in the spring of '07, Godaddy.com sites were blocked days before the Olympics in Beijing in '08, and now Blogspot has been blocked in May of '09.

Oh the joys of being a China blogger.

Seeing the furious pace I've been blogging over the past few months, this is probably a good time for me to slow down. I'll still post, just probably not every day.

To all of my readers out there, thanks for continuing to read my rantings on this blog. As I've said before, exploring China with all of you on a daily basis is wonderful. I love doing it and I appreciate the good will that so many of you have given me.

Thursday, May 14, 2009

China is finding that it has to get its health care system in order before it can move forward economically.

From The Financial Times a couple days ago:

China’s economy has turned the corner. Government banks have been lending at a rapid rate, factory output is rising again and the local stock market is blazing ahead. But just how quickly the world’s most populous country emerges from the global economic crisis will depend, in part, on places such as the cancer ward of Jingdong hospital in Sanhe, not far from Beijing, and how they treat patients like Cao Jun.

Aged 13, Jun was diagnosed a few months ago with leukaemia. His parents managed to get him into the hospital, a Sino-US joint venture, and have been impressed with the level of care. “The doctors and nurses have been very helpful and are doing everything they can to assist us,” says his father, Cao Jirui.

But Mr Cao now works in part-time jobs after losing his position in a factory and, with little money left, he knows his son will not be able to stay much longer. “My son’s disease is bleeding our family financially dry,” he says.

Patients who cannot afford to treat serious illness are an all too common feature of any developing country. But they are particularly important in China for two reasons. The failings of the healthcare system have become a large source of political discontent, the biggest blot on the Communist party’s claims to be substantially improving the welfare of ordinary Chinese. In addition, health insurance has become a central issue in the country’s immediate economic future. For all the signs that China is beginning to rebound, the government has only won half the battle. To return to rapid rates of expansion, the country will need to find new sources of growth to replace stagnant exports, and that means boosting consumption.

f the US economy stored up problems for itself through consuming too much, China has distorted its economy by saving too much and spending too little. In recent years, the savings rate has risen as high as 50 per cent of gross domestic product, including the retained earnings of state-owned companies, and even families with incomes of less than $200 a year still save 18 per cent of their income, according to the World Bank.

One of the main underlying causes is the weakness of the social safety net. Many Chinese put a large chunk of their wages into bank accounts because they are worried about pensions, education expenses and – most of all – the prospect of a big hospital bill if a family member falls seriously ill.

This article goes on to say that the effects of China's new push for a better health care system in the next couple years are probably going to fall short of completely revamping the health care industry. These numbers were a key illustration:

For a start, coverage under the insurance plans is limited – for rural residents, it will be Rmb120 a year, compared with an average in-patient hospital bill of Rmb4,000. Most local governments provide additional subsidies, especially for serious illness, but patients usually end up with substantial bills. Researchers at Tokyo University, who examined the pilot programmes for rural health insurance, found the impact on health expenditures by individuals only modest.

One hundred and twenty RMB a year is a very small amount of money (about $17.58), even in China's impoverished countryside.

Indeed, China has a very long way to go in terms of modernizing its health care infrastructure.

Although it is going to be difficult and costly, getting China's health system sorted out is a great goal for both idealistic and practical reasons.

Of course, China's people deserve the right to modern medicine and technology. Much of China is getting rich. It seems logical that the benefits of economic expansion would include improved medical care.

On the more practical side, freeing China's populace from the potential prospects of having to pay for massive medical costs would allow its citizens from having to horde money like they do now. If Chinese families always have to have massive funds stored for a potential sickness, it's going to be a while before China becomes a "nation of consumers," a change China's leadership wants to see.

America, the wealthiest nation on Earth, shows just how difficult it is to get a proper medical system in place. Health care continues to be one of the biggest concerns for Americans. Now there can surely be criticisms of the kind of system that the US is trying to implement, but the country's struggles with the quality of its medical system show that the problem is a very tricky one. Even for very powerful and rich countries.

China's health care system is going to take years and years to sort out. Even if it has taken the financial crisis and the government's desire for its citizens to spend more of their money, the fact that the issue appears to be being taken more seriously is a good thing. China needs to get working urgently on this now.

I saw news today on the rise of China's consumer spending and the decline of it industrial output.

At this point, I'm used to this conflicting kind of news from China. But how to interpret such headlines, and general opposing news trends coming out of China, is a very difficult task.

I found two compelling articles today that I'll post on here. One laying out why China and other Asian "tiger economies" are poised for recovery. Another arguing that China's bubble economy will not be immune to a worldwide downturn.

The first, more positive article, from The Economist:

Asia's tiger economies have suffered some of the sharpest declines in output during the global recession, and some fear that, because of their dependence on exports, they will not see a sustained recovery until demand rebounds in America and Europe. However, their doughty resilience should not be underestimated. They came roaring back unexpectedly fast after the Asian crisis of the late-1990s. They could surprise again.

Across the region as a whole, the slump has been as bad as it was in 1998. China and India have continued to grow, but in the rest of emerging Asia GDP plunged by an annualised 15% in the fourth quarter of 2008. Only three economies have published first-quarter figures. China’s GDP growth accelerated to an annualised rate of over 6%, up from around 1% in the previous quarter. South Korea’s GDP expanded by 0.2%, after plunging 19% in the previous three months. But Singapore’s GDP fell by 20%, even more than in the fourth quarter.

More timely export figures suggest that the worst may be over. Although the headline numbers show that South Korea’s exports fell by 19% in the year to April, they rose by a seasonally adjusted annualised rate of 53% in the three months to April compared with the previous three months, Goldman Sachs estimates; Taiwan’s grew by an annualised 29% over the same period. China’s exports over the last few months have only managed to stabilise, but its industrial production jumped by an annualised 25% in the past three months.

Economists are revising up their forecasts for China’s GDP growth this year: 8% may now be possible even if American consumers continue to be frugal. There is a widely pedalled myth that China’s growth depends on American consumers. In fact, if measured on a value-added basis (to exclude the cost of imported components), China’s exports to America account for less than 5% of its GDP.

The basic ideas in this article are that Asia's countries have the government stimulus "ammunition" to ride this out, that they have benefited greatly from the fall in price of commodities, and that they have healthier private business balance sheets.

Over the last three- and six-month periods, Chinese stock indexes have led a global rally. China has outdone emerging markets broadly and left US indexes well behind. The iShares FTSE/Xinhua China 25 Index has outperformed the iShares MSCI Emerging Markets Index and the S&P 500. This does not fit standard macroeconomic patterns, theory or intuition.

Leveraged industrial exporters and credit providers do not walk through the blazing destructive fires of the present global economy without getting burned. For 20 years, China has accelerated into the most rapid and sweeping large-country industrial revolution we have ever seen. The changes are real. We are seeing a transfer of industrial production from many locations. Transnational firms from the US, the euro zone and Asia have come for the infrastructure, wage rates, environmental policy, workers and market. They have also come for the bubble.

It is very difficult to separate the bubble from the real economic revolution. Both are clearly present. For the last four months it has been the bubble that has been the dominant element in China perception and investment. The China-centric emerging market bubble has led us up since February 2009.

To move from global production with transnational partners to domestic production is a sea change in an economy. This means changing what, where, how and at what wages you produce.

...

None of this is to doubt the power and transformation of China. It has arrived as a global power and will continue to do so over decades to come. China has not triumphed over the business cycle. No one ever has and no one ever will. As her imports fall, her energy consumption and generation declines and her shipping tonnage falls - China is struggling.

Middle Kingdom investments are a growth play in a global economy without growth. China has arrived and will suffer as the rest of the global economy suffers. Ironically, it is the weakness that shows that China has arrived. The recent meteoric rise of her shares and indexes is simply the latest in a long string of bubbles. As emerging markets and China have led up lately, it seems increasingly likely they will lead the way down.

So basically this author does not see growth in an economy that is so tied to the rest of the world. This author's idea seems to be that China cannot move up in a globalized economy that is unilaterally moving down.

Which opinion is right? Will China's economy be a lone spot of growth in an otherwise dim world economy? Or is the current optimism about China simply irrational exuberance?

WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner will visit Beijing next month for two days of meetings with top Chinese officials aimed at strengthening the economic relationship between the United States and China, the Treasury Department said on Tuesday.

Geithner is due to meet top Chinese economic policymakers on June 1-2 "to discuss a range of issues of importance to both countries, including strengthening U.S.-China economic ties to promote stable, balanced and sustained economic growth in the two nations," the Treasury Department said in a statement.

There's little doubt about which country America's leaders need to placate during this economic crisis. Geithner is going to try to instill confidence about China's further backing of the US debt. China is going to want assurances that the US has a plan to get its economy back on track. China needs the US to get out of its current funk.

From AFP:

WASHINGTON (AFP) — China may not be able to sustain its economic expansion in 2010 if there is no recovery particularly in the United States and Europe, a senior World Bank official said Tuesday.

China posted growth of 6.1 percent in the first quarter of 2009, down from 6.8 percent in the final three months of 2008, underlining the impact the global crisis is having on the world's third-biggest economy.

"I think the key concern is if the rest of the world begins to recover, in particular Europe and the US, China's exports market returns, then there is a high probability that we get higher growth rates next year -- that is the key determinant," said Jim Adams, World Bank's Vice-President for East Asia and Pacific region.

...

If there is no recovery in the United States and Europe, which are top export markets for China, Beijing has to provide domestic stimulus to fuel growth in the world's most populous nation, he said.

If the United States, for example, grew at a pace of three percent next year as projected by the government, "then I think we will be quite confident China will be able to increase its growth rate next year.

"If not, China has to rely on domestic stimulus," he added.

"The ability of the government to sustain 6.5 percent (growth) is heavily within the control of the government because the government has the fiscal resources to provide the stimulus," Adams said.

Now that stimulus packages have rendered the governments of the world the driving forces in the global economy, I hope that China, the US, and the other countries' leaders navigate us well through this mess. But based on how bailouts and other measures have gone so far, I'm not sure that there should be too much optimism for this to happen smoothly and efficiently.

Monday, May 11, 2009

I remember May 12, 2008 clearly. Here is the post I wrote on my old blog one year ago:

Until I just read on the internet that the earthquake originated from Chengdu, I was sure that it had come from Xi'an or somewhere close to Xi'an in Shaanxi Province.

Jackie and I were in my apartment when we started hearing the closed windows banging like the wind outside was howling. A few seconds later my apartment building started swaying. Jackie and I ran to the bathroom of my apartment. I told her to stand in the door frame since I remember from early elementary school that that is the safest place to be in an building during an earthquake. My recently purchased coffee plunger in the kitchen fell off the counter and shattered. A few other things fell off my walls.

Things kind of calmed down but then started up again. We were walking around the apartment trying to find our shoes so we could go outside. At this time, it felt like walking on a cruise ship on a choppy sea. It wasn't like I was about to fall over, but I did kind of hold on to the walls to keep my bearings.

After the swaying had completely stopped, we walked down the five flights of stairs to the ground floor. I heard hordes of screaming children from the elementary school behind my apartment complex. The children's wailing made this descent down my stairwell a rather surreal experience.

Jackie and I went outside where a large group of people had already congregated. Everyone was frustratedly looking at their cell phones and trying to use them to no avail. The cell phone network had gone down. It was kind of strange to look at around at scores of people and not see anybody using a cell phone. In China in 2008, this is a rare site.

After fifteen minutes of standing around, we decided to go to the store to buy groceries for dinner tonight. Along our walk to the store there were people everywhere on the sidewalks. It appeared to me that the earthquake had turned into a makeshift siesta. People all seemed in good spirits as they demonstrated how they'd handled the tremors.

At that time, I really did not understand what had happened. I had never experienced an earthquake before. I was sure that the earthquake's epicenter had been in Xi'an. And seeing that everyone around me was OK, I didn't sense the death and destruction that had just occurred.

There had, in fact, been an unthinkable amount of horror.

From The Financial Times:

When the earthquake struck, Li Hong was sitting on the couch at home in the town of Beichuan, directly above the fault line.

Seven months pregnant with her second child, all she could think of was her six-year-old daughter in the town’s elementary school as the ground shook and she struggled to escape from her third-floor apartment.

Three days later, in hospital, she found an injured girl from her daughter’s class who escaped from the rubble of the school.

“I asked her if she had seen my daughter and she said the last time she saw her was when the earthquake struck and the children ran into the playground and my daughter was one step behind her,” Ms Li says, looking down at her nine-month-old son for comfort. “The girl said when she turned around, a hillside ­collapsed and buried the other children.”

One year after the devastating May 12 tremor that left nearly 90,000 people dead or missing, the affected areas of Sichuan are filled with such stories.

This disaster was a natural one. But the disaster has not been limited to the natural sphere. Click through on this FT article and read the whole thing and watch the video. Ugh.

Although this earthquake happened one year ago, it will continue to haunt people for years. If you are interested in donating money or getting involved with recovery in the affected areas, I suggest that you get in touch with the following charities: The Yellow River Soup Kitchen or The Library Project. Both of these organizations have done amazing things in earthquake affected areas and in western China in general.

One week to the minute after the earthquake happened at 2:28PM on May 19th, 2008, the entire country of China shut down for a few minutes to honor those lost in the previous week's earthquke. I happened to be in Xi'an's city center next to the Bell Tower when this happened. It was an incredibly moving experience.

Thankfully, someone standing a few feet away from me took a video while it was going on and posted it to YouKu. The video can be viewed here. Skip ahead to 4:00 into the video. It is intense.

Sunday, May 10, 2009

In the summer of 2007, my brother and I went out to Xinjiang for a couple weeks. That time was a definite highlight of my time in China.

One of the main things I wanted to see out in Xinjiang was Kashgar's Sunday market. Although I heard a lot of travelers out there say that the market isn't as "pure" as it used to be and that they were disappointed by it, spending a few hours at the market lived up to my expectations.

"You know, I don't think it is possible for us to get farther away from home than where we are right now," my brother said. I nodded and laughed. We were at the Kashgar animal market, in the middle of a dirt field on the outskirts of town. Men with long white beards schmoozed over cattle, boys tried to impress their elders by keeping their animals in check, and farmers hauled newly purchased goats and cows (no pigs in Muslim Kashgar) around in three-wheeled tractors painfully small for the task.

We'd just come from the largest outdoor market in the world, the Kashgar Sunday market, where every week tens of thousands of people from the region surrounding Kashgar descend upon the city to buy, sell, and barter.

We'd gotten to the market early, at 6:30 a.m. I'd forgotten that Kashgar time is two hours off the official standard Beijing time. Though painfully early, the market was already abuzz, with sellers setting up for the onslaught of people that was set to arrive in the coming hours. Fathers barked orders to sons, daughters helped their mothers lay out silk, and a handful of buyers wandered about looking for early-bird specials.

By 8:30, the energy in the air was electric. As an ancient Silk Roadtrading post, the market is a Kashgar tradition that goes back many centuries, and it was obvious that the people of Kashgar are virtuoso buyers and sellers. Simply watching the action was an incredible experience, as market-goers haggled over silk, carpets, Iranian saffron and hand-crafted knives, just to mention a few of the dazzling array of goods for sale.

After a full morning of prime people watching, it was off to the livestock market, its Kashgar cowboys and Uighur goatherds, for a taste of rustic Xinjiang.

Here are some of my favorite photos of the faces that we saw that morning:

Saturday, May 9, 2009

Although I'm an American, I do enjoy me some English Premier League football (soccer).

I played organized soccer from the time I was five until I was fifteen. Soccer and basketball were my favorite sports to play growing up. I also enjoyed watching soccer on TV when I could too. But the opportunity to watch soccer on TV in America is basically limited to the World Cup every four years. So I never got into the sport as much as I could've had I had the chance to watch it more.

My passing interest in watching soccer changed in 2006 though. My first roommate in China and still good friend, James, is one of the most hardcore Bolton Wanderer fans on the planet. He took my eager-to-learn soccer mind acted as my primer to the best football league on the planet - the English Premiership.

During James and my late night viewings of the league on Shaanxi TV 7, he explained to me why Chelsea is evil, why Arsenal is the most easy-to-root-for of the "big four," and why the bland, grind-it-out playing style of Bolton's (then) manager Sam Allardyce was effective. The games being shown for free in Xi'an truly gave me the opportunity to become a fan of English football. Indeed, I would get well into the discussions that my English friends were having on the league.

But then after the '06-'07 season, the English Premier League decided that allowing China, the already NBA-crazy country with the most potential EPL fans on Earth, to watch the games for free is a bad idea. They made all of the games pay-per-view, which essentially killed any opportunity for Chinese people or myself, to get into the games.

Citing the NBA's ridiculous popularity in China, I told my English friends that the league was making a huge mistake. It turns out that I was right and that the EPL now sees that the move to make games in China pay-per-view was a bad move.

From The Times Online:

Image of Liverpool's Dirk Kuyt from Sportydesktops.comPRESSURE from the Premier League’s “big four” clubs has forced a change in strategy in the way it will sell its next tranche of overseas rights, with the league desperate to get back on terrestrial television in China.

This comes after lobbying by Manchester United, Arsenal, Chelsea and Liverpool, all furious at attracting a relatively low number of viewers in the world’s most populous country. China is home to 1.3 billion people but under the current deal there with a minor pay-per-view operator, hardly anybody subscribes.

WinTV won the Chinese rights for 2007-10 after bidding about £8m a year, a small amount in the context of the £210m gained from all overseas territories combined (about £630m over three years) but the highest bid from China. Its dreams of attracting 1.2m subscribers were hit by high pricing and bad marketing, and ratings in the tens of thousands remain so low they barely register.

Asia in general and China in particular are key markets for the big four; United are among clubs who will tour there this summer. The club’s chief executive David Gill says: “We must have better exposure. The reality is that [will] help us with our business goals and other commercial aims.” Well-placed sources confirm that Chelsea, Arsenal and Liverpool feel the same.

A Premier League source said last night: “We envisage a switch in strategy, probably to a dual approach with some pay-TV games and others free to air in China on state-run CCTV, if we can achieve that.

“With the way China is developing, there is a need for a more sophisticated approach. It’s not just a case of wanting the Premier League to be more popular than Serie A or La Liga in China, or even trying to make football as popular as basketball, it’s about fighting for viewers in the whole cultural landscape.”

My large contingent of English friends living here in Xi'an are going to be happy to hear this news. In future years, Chinese people and foreigners living in China will no longer have to illegally watch the games streamed on the internet at hubs like Justin.tv and Live Footy.

The only problem is that, from the way I understand the article, these expanded TV rights are going to take effect until the season after next. But hey, at least things are moving in the right direction for Chinese people having the opportunity to watch (at least some games of) the English Premier League for free on TV.

Friday, May 8, 2009

The nation-wide popularization campaign for the use of the Chinese-language domain name ".中国 (China)" was launched in Beijing on May 7. People's Daily Online, Xinhuanet.com, Sina.com and QQ.com have taken the lead in registering under the domain name ".中国."

So far, 90 percent of national provincial or ministerial-level government organizations, 95 percent of traditional media websites, over 90 percent of the 211-engineering universities, over 50 percent of China's top 100 enterprises and over 40 percent of China's top 500 enterprises have already registered to use the ".中国" domain name.

It is expected that within the next two years, China's mainstream websites will all be using the ".中国" domain name.

You pay US$700 to use a server in China that lets you send all the spam you like. It's called bulletproof hosting, and to the people who fight spam and cybercrime it's becoming a big problem.

Cybercriminals use these services not just to host servers, but also to register Internet domain names that they use for spam and online attacks. In a three-month period this year, researchers at the University of Alabama at Birmingham traced more than 22,300 domains, all used to send online pharmaceutical spam, to just six bulletproof computers hosted in China, said Gary Warner, director of research in computer forensics at the university.

...

Several dozen bulletproof hosting services operate worldwide, but the "vast majority" of them are in China, Warner said. Even scammers from countries considered soft on spam use the services because they are so reliable, he added. "Even the Russians use the Chinese bulletproof registrars."

The providers are upfront about what their services are used for.

Here's how one company, Tecom, promotes its service: "Usually, your web hosting provider will shut down your web site within days, or even sooner, if they find out you are sending bulk e-mails and directing people to your site on their server. Bullet-Proof Web Hosting helps you to direct customers to your web site, and you won't have to worry about being shut down because of spam complaints."

BEIJING, May 7 (Reuters) - China may have to endure weak external demand for a extended period of time as the world economy is unlikely to recover soon, the Ministry of Commerce said.

'There are some positive signs in China's external trade situation recently, but sluggish global demand may last for a relatively long period of time,' it said in a report published on its Web site.

The ministry also said the drastic currency swings in some nations has added uncertainty to the global trade outlook.

'Some developing countries that make similar goods as China saw their currencies depreciate significantly against the US dollar, which had a big impact on the price competitiveness of Chinese products,' it said.

The US and the other countries that fueled China's export-based economy aren't going to be back for years, if ever. China is going to have to come up with domestic demand for Chinese products that will help take the place of foreigners'. This isn't going to be an easy proposition though.

DACHEN, China (Reuters) - Like prodigal sons, China's exporters are returning home to sell their products as global economic gloom takes a toll on their overseas orders.

Yet exporters of goods ranging from apparel to electronics are hardly finding a fatted calf laid out for them.

Despite a track record in manufacturing products to global standards for leading brands, many are finding it tough to tap into China's domestic market due to cut-throat competition, lack of local brand names and poor domestic distribution networks.

...

Still, firms face hurdles in focusing on the domestic market, said Michael Gao, a salesman with Chaowei Industry, a maker of electronic gadgets, including talking alarm clocks, based in the southern boom town of Shenzhen.

For one, the tax rebates Beijing offers to spur exports of goods such as textiles and electronics mean that companies are forced to raise prices for their domestic clients, Gao said on the sidelines of the Canton Fair, China's top trade fair.

"We have no choice," Gao said. "At the very least, our prices are 15 percent higher for domestic buyers."

A difference in business culture also makes the transition difficult, Gao said.

"Domestic clients are very different. Be it the quality of the products, the quality of the clients themselves, or the size of the orders, these all tend to be worse than for overseas buyers," he said.

Although China is certainly getting richer, it's still a poor country. It's people, as a whole, don't consume like westerners, especially Americans. This presents a problem when it comes to China doing something with its substantial manufacturing capacity.

With the admission that exports are going to stay surpressed from China's Ministry of Commerce, it sounds like the leadership in China aware about what the next few years are going to be like. Hopefully they have some good ideas about what to do with this knowledge.

Thursday, May 7, 2009

I've been conscious of how much economic-related news I put on this site recently. I don't want Mark's China Blog to turn into a China financial/economic news blog.

Although I don't want to get too entrenched in economic analysis, I'm having trouble resisiting diving into economic and financial numbers I find on a daily basis. There is just so much interesting news going on with the financial crisis and China's place within the global economic maelstrom.

So today, for better or worse, I've chosen to highlight more economic stuff.

I'll start with some good news for GM. From The Wall St. Journal:

BEIJING -- General Motors Corp. said its sales in China hit a monthly record in April, rising 50% from a year earlier on strength in its Buick and Wuling brands.

The strong performance in China by the U.S. auto maker, until recently the world's biggest by output, contrasts with its struggles in its home market. GM is racing to restructure outside of bankruptcy court in the U.S., and is expected this week to accelerate talks with the United Auto Workers union and move toward closing about 2,600 dealerships.

GM, which posted record China sales of 151,084 units in April, has two joint ventures in the country: passenger-vehicle maker Shanghai General Motors Corp., a 50-50 venture with Shanghai Automotive Industry Corp., and mini-commercial vehicle maker SAIC-GM-Wuling Automobile Co., a three-way partnership with SAIC and Liuzhou Wuling Motors Co.

As the article notes and Thomas, a frequent commenter on this site, has pointed out before, GM's presence in China is a joint-venture. So it's not as if GM is simply going to be able to replace its American sales collapse with the Chinese market. But it is worth noting that people in China are buying GM cars.

There is also a lot of news on China's lending today, too. Although it was expected, the fact that Chinese banks appear to have cooled off lending in April (instead of continuing its unprecedented rates earlier in the year) is another positive thing to report.

China's new bank lending in April was likely above 600 billion yuan ($87.8 billion), sharply lower than the record trillion-plus yuan loans in earlier months this year, a state-run newspaper said Tuesday, citing unnamed industry figures.

...

"Clearly, new lending in the rest of the year at the same pace ... or half as fast ... as in the first quarter would be unthinkable and too fast," UBS economist Tao Wang said in a report issued last week.

Apart from the risk of spurring inflation by pumping too much money into the economy, "Growth may not be sustainable if demand is mainly driven by the government and easy credit, and the risk of massive resource misallocation rises," she said.

One worry is that excess investment in some industries could lead to gluts and overcapacity, further depressing corporate profits, said Sherman Chan, an economist at Moody's Economy.com.

She noted that while corporate earnings improved dramatically over the last quarter of 2008, stripped of seasonal effects net profits for companies listed on mainland stock exchanges fell nearly 26 percent from a year earlier.

While recent surveys suggest a mild rebound in export and domestic industrial demand, China's 6.1 percent growth in the first quarter fell short of the leadership's 8 percent goal for the year.

Electric power generation - a key indicator of industrial activity - likely fell by 4 percent in April from a year earlier, Xue Jing, director of the statistics department of the China Electricity Council, told the state-run newspaper China Daily.

This article is a little disconserting. Despite the perception that China is recovering, some of the key indicators of how the economy is functioning mentioned in this article are not too glowing. Things in China are still really difficult. It seems dangerous to me to pack everything up and think that things are going to be great in China going forward.

Saying that, the Chinese do appear to have a grasp on what is going on with their credit system. They, unlike the Americans of a few years ago, are realizing that unchecked lending can be incredible problematic.

Now we just have to see what happens over the course of the year. Chinese banks have obviously been directed to pump out their money to help avoid the crisis upon which the rest of the world is engulfed. And the banks have more than complied. China is swimming in credit.

What happens if things go further south in other countries though? Right now, China is an economic beacon in an otherwise very dark and scary economic environment. Will Beijing continue to see this kind of lending as the prevention of a Chinese economic crisis? Will the powers-that-be be willing to keep this lending at dangerously high levels?

Tuesday, May 5, 2009

In the midst of the worst economic crisis since the Great Depression, a new world order is emerging, with its center gravitating towards China. The statistics speak for themselves. The International Monetary Fund (IMF) predicts the world's gross domestic product (GDP) will shrink by an alarming 1.3% this year. Yet, defying this global trend, China expects an annual economic growth rate of 6.5% to 8.5%.

During the first quarter of 2009, the world's leading stock markets combined fell by 4.5%. In contrast, the Shanghai stock exchange index leapt by 38%. In March, car sales in China hit a record 1.1 million, surpassing sales in the US for the third month in a row.

"Despite its severe impact on China's economy, the current financial crisis also creates opportunity for the country," said Chinese President Hu Jintao. It can be argued that the present fiscal tsunami has, in fact, provided China with a chance to discard its pioneering reformer's leading guideline. "Hide your capability and bide your time" was the way former head of the communist party Deng Xiaoping once put it. No longer.

Recognizing that its time has indeed come, Beijing has decided to play an active, interventionist role in the international financial arena. Backed by China's US$2 trillion in foreign exchange reserves, its industrialists have gone on a global buying spree in Africa and Latin America, in neighboring Russia and in Kazakhstan, to lock up future energy supplies for its economy. At home, the government is investing heavily not only in major infrastructure, but also in its much neglected social safety net, its healthcare system, and long overlooked rural development projects - partly to bridge the increasingly wide gap between rural and urban living standards.

...

All signs are that Washington will be unable to restore the status quo ante after the present "great recession" has finally given way to recovery. In the coming years, its leaders will have to face reality and concede, however reluctantly, that the economic tectonic plates are shifting - and that it is losing financial power to the thriving regions of the Earth, the foremost of which is China.

This whole lengthy article is worth reading. It goes through the list of reasons why China is prepared to fight the economic crisis: low urban unemployment, high savings rate, state-controlled banking system, energy expansion and security, and the rise of its currency, the yuan.

While some of the arguments the article makes can be debated, it makes compelling arguments for why, on a whole, China is going to be much stronger when the world economy "recovers."

There is another article out today, from the Financial Times, that discusses the eventual rise of China and why it will establish itself at the top of the post-crisis world. This article focuses more on financial matters:

Emerging economies such as China and Russia are calling for alternatives to the dollar as a reserve currency. The trigger is the Federal Reserve’s liberal policy of expanding the money supply to prop up America’s banking system and its over-indebted households. Because the magnitude of the bad assets within the banking system and the excess leverage of its households are potentially huge, the Fed may be forced into printing dollars massively, which would eventually trigger high inflation or even hyper-inflation and cause great damage to countries that hold dollar assets in their foreign exchange reserves.

...

Ethnic Chinese, including those in the mainland, Hong Kong, Taiwan and overseas, may account for half of the foreign holdings of dollar assets. You have to check the asset allocations of wealthy ethnic Chinese to understand the dollar’s unique status.

The Chinese love affair with the dollar began in the 1940s when it held its value while the Chinese currency depreciated massively. Memory is long when it comes to currency credibility. The Chinese renminbi remains a closed currency and is not yet a credible vehicle for wealth storage. Also, wealthy ethnic Chinese tend to send their children to the US for education. They treat the dollar as their primary currency.

...

America’s policy is pushing China towards developing an alternative financial system. For the past two decades China’s entry into the global economy rested on making cheap labour available to multi-nationals and pegging the renminbi to the dollar. The dollar peg allowed China to leverage the US financial system for its international needs, while domestic finance remained state-controlled to redistribute prosperity from the coast to interior provinces. This dual approach has worked remarkably well. China could have its cake and eat it too. Of course, the global credit bubble was what allowed China’s dual approach to be effective; its inefficiency was masked by bubble-generated global demand.

China is aware that it must become independent from the dollar at some point. Its recent decision to turn Shanghai into a financial centre by 2020 reflects China’s anxiety over relying on the dollar system. The year 2020 seems remote, and the US will not pay attention to something so distant. However, if global stagflation takes hold, as I expect it to, it will force China to accelerate its reforms to float its currency and create a single, independent and market-based financial system. When that happens, the dollar will collapse.

I found this article's discussion of Chinese peoples' love of the US Dollar to be interesting. I can understand that when the trillions of dollars that are now flooding the US market in the not too-distant future will cause debilitating inflation and, thus, turn off the Chinese, whose massive savings in US dollars will be rendered worthless.

It only makes sense that the Chinese are itching to get the world's financial systems working in the "Chinese way."

I'm going to feature one more article today, an editorial from The Los Angeles Times, that talks about the "Chinese way" and why the Chinese are going to run into a whole different set of problems when it is their turn to be leaders in the twenty-first century:

Which country -- the United States or China -- will make the 21st century its own?

When President Obama recently called for American young people "to be makers of things" and focus on subjects such as science and engineering, it was partly a nod to China's rapid growth. Had he lived, taught and consulted in China for the last 33 months, as I have, he might have urged American students first to follow his example and study the liberal arts. Only technical knowledge complemented by well-honed critical and creative thinking skills can help us regain our innovative edge. China's traditional lack of emphasis on teaching these skills could undermine its efforts to develop its own innovative economy.

I once challenged my Chinese MBA students to brainstorm "two-hour business plans." I divided them into six groups, gave them detailed instructions and an example: a restaurant chain. The more original their idea, the better, I stressed -- and we'd vote for a prize winner. The word "prize" energized the room. Laptops flew open. Fingers pounded. Voices roared. Packs of cookies were ripped open and shared. Not a single person text-messaged. I'd touched a nerve.

In the end, five of the six groups presented plans for, you guessed it, restaurant chains. The sixth proposed a catering service. Why risk a unique solution when the instructor has let it slip he likes the food business?

Though I admitted the time limit had been difficult, I expressed my disappointment and reiterated what I had expected -- originality -- and why. But they'd been so enthusiastic that I couldn't deny them a winner. After a polite discussion of the merits of each idea, the Haagen-Dazs gift certificates were awarded, but not without controversy. Runners-up later complained that an identical concept had been featured on CCTV the night before.

...

Ultimately for China, becoming a major world innovator -- and by extension, a robust economic power -- is not just about setting up partnerships with top Western universities or roping off elites and telling them to think creatively. It's about establishing an intellectually rich learning environment for young minds. It's about harnessing the same inventive energy of the street markets and small-time entrepreneurs and putting it in the schools.

The Chinese don't need expensive free-agent scientists. They need a new farm system -- and about 10 million liberal arts professors.

Just like the world has faced problems because of the way the US has run itself, the world will surely face problems because of the issues China has. As I've discussed a few times recently, China's education system has some very serious problems. The Chinese system just has not figured out how to get its students to think creatively.

From the articles I've referenced today though, the conventional wisdom is saying that the twenty-first century will be China's. At this point in time, it's pretty hard for me to imagine a world going forward that doesn't have China on top.

In terms of people, land size, location, and development, China rising to the top of the world's pecking order seems to be a pretty natural move to me. It's the most populated nation on Earth. It's the heart of Asia. It has tons of natural resources. It's infrastructure is finally reaching the point where it can really take off.

Indeed, it's almost impossible for China to not overtake the US at some point in the coming century in terms of economic prowess, influence, and everything else that goes along with being a superpower.

China is not quite a "super-power" yet. But if one thinks that it's more than a decade or two from being one (or the one), I don't think that that person is looking at the facts. And for the US or any other countries that don't like China's rising, I don't see how the Middle Kingdom can be stopped.